Senate considers pegging Medicare drug prices to deeply discounted Veterans Affairs rates

WASHINGTON — Senate lawmakers are actively considering pegging the prices Medicare pays for drugs to those drug makers offer to other government programs like the nation’s veterans health program, according to sources familiar with the discussions as well as an internal slide deck obtained by STAT.

The proposal, known internally as domestic reference pricing, could have a multibillion-dollar impact on drug makers, which have long opposed allowing Medicare to negotiate over drug prices.

Pegging prices to what drug makers offer the Department of Veterans Affairs was one of seven options outlined in a June 7 slide deck detailing an influential Senate committee’s drug pricing deliberations. The other options listed were: pegging the price to the average price charged in a therapeutic class; reducing prices based on how much taxpayer money is used to develop a drug; adjusting drug makers’ launch prices to inflation; using the price paid by Medicaid; limiting the price to 120% of the international reference price; and setting prices based on manufacturers’ cost of production plus a set profit margin.

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